- Supreme Court of Lithuania
LONG-TERM CONTRACTS - LEASE CONTRACT - BETWEEN TWO LITHUANIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES TO CONFIRM THE SOLUTION ADOPTED UNDER APPLICABLE DOMESTIC LAW (LITHUANIAN LAW)
HARDSHIP - PRESUPPOSES FUNDAMENTAL ALTERATION OF CONTRACTUAL AGREEMENT - ARTICLE 6.204 OF THE LITHUANIAN CIVIL CODE INTERPRETED IN ACCORDANCE WITH ARTICLES 6.2.1, 6.2.2, 6.2.3 OF THE UNIDROIT PRINCIPLES
HARDSHIP - ECONOMIC CRISIS - DECREASED NUMBER OF TOURISTS, INCREASED VAT AND CHANGED MARKET PRICES FOR A RENT WAS CONSIDERED SUFFICIENT REASON FOR CHANGING (REDUCING) THE CONTRACT PRICE
Two Lithuanian companies concluded a lease contract for a building that lessee used for accommodation services (hotel). Parties agreed that rent price is 50 LTL/sq.m. During the economic crisis, number of tourists dropped down, the VAT for hotels was increased form 5 to 21 percent and market prices for similar buildings in the same area decreased to average price of 33 LTL/ sq.m.
Court emphasized that the fact one party has to pay the same rent price as it did before does not mean the cost of party's performance hasn't increased. Due to economic crisis even the same contract price can fundamentally alter the equilibrium of the contract. Court decided that parties should share the effects of financial crises and decreased the rent price.